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Planning Commission to NITI Ayog


By Lakshita Singh


Planning Commission to Niti Aayog: A review

The Planning Commission was instituted on 15 March 1950 by a Cabinet resolution by Jawaharlal Nehru. He was impressed by the Soviet Style planned economy and wanted to provide a base for robust State led growth in independent India. On 15 August 2014, Prime Minister Narendra Modi announced that the Planning Commission would be shut down and a new NITI Aayog – National Institute for Transforming India, will be replacing the institution. Thus, India transitioned from the Five Year Plans to the 15-year vision, 7-year strategy and the 3-year Action Plan documents.

This is a significant move as the Planning Commission formed the backbone of the Indian economy at the time when we were a newly independent country. Its significance diminished vastly in the 1990s with Liberalization, Privatization, and Globalization but it was still involved in the allocation of funds to the states. The demise of the Planning Commission shows the shift of the role of government from a “player” to an “enabler”. It also goes along with Modi Government’s motto of “More governance and less government” as the NITI Aayog serves as the Think Tank of the Government of India, with little discretion over the allocation of resources or implementation of a Five Year Plan.

President Eisenhower said, “Plans are useless but planning is indispensable”, the setting up of NITI Aayog is an important aspect of the rising Indian Economy which needs a direction. Some have called this transition a mere change in nomenclature as the building, the staff and the institutional framework of the Planning Commission has been inherited by the NITI Aayog and this serves as a major point of continuity. The paper analyses the points of break and continuity in the two institutions.

The Planning Commission

The Planning Commission was established as a result of a Cabinet resolution. Members were appointed by the Prime Minister without any selection criteria. The Commission was to move towards indicative planning from the Eighth Five-Year Plan, but such a move was never realized in reality. In the Annual Plan of 2014-15, Rs. 3,38,408.49 crores were earmarked for State and Union Territory Plans which is allocated under the Centrally Sponsored Schemes(CSS). Efforts of State Governments in social sectors was supplemented by the Centre by CSS like Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), Sarva Siksha Abhiyan(SSA), Mid Day Meal Programme (MDM) to name a few. (Planning Commission)

Planning Commission’s lack of accountability, hijacking the role of other central bodies like the Finance Commission, lack of specialization, becoming a roadblock in the Path of Federalism and its all in all futility in the Modern economy lead to the diminishing importance of the Planning Commission. (CUTS )

It was also criticized by Dr. Manmohan Singh who alluded that the Commission had outlived its utility and lost its relevance. (Dab)

The NITI Aayog

NITI Aayog inherited the Planning Commission’s Yojana Bhawan and 800 employees. It was slimmed down in the first year to about 500 employees and hiring of new staff with economic experience was focused on. (Pangariya) The staff was divided into two hubs. One, the Knowledge and Innovation Hub which accumulates and disseminates knowledge. Second, the Team India Hub which serves as a link between states and ministries at Centre. (Pangariya)

The NITI Aayog’s Governing Council includes all state chief ministers and Lieutenant Governors of the Union Territories which form various sub-groups to advise the Central Government on subjects of Centrally Sponsored Schemes. 

NITI Aayog’s objectives are the promotion of cooperative, competitive federalism; assisting the central government in policymaking, and serving as the government’s think tank. It is like a central node linking up relevant stakeholders and think tanks with groups like Team India Hub and Samavesh. Samavesh is an initiative to network and partner with knowledge and research institutions using a hub and spoke model. This shared narrative generated by the NITI Aayog compels stakeholders in the planning process to act upon the plan. This transforms the planning approach from a top-down to a bottom-up approach.

It is NITI Aayog’s mandate that it is impossible to achieve national growth without active cooperation from the State Governments. Such an objective was also sought in the District Planning Committees as introduced by the 74th Constitutional Amendment, 1992. NITI Aayog after intensive and expeditious research has formulated guidelines for the States which have been incorporated by them. Like the Model Land Leasing Law Act, 2016 was enacted as legislation in Madhya Pradesh and Uttar Pradesh. (NITI Aayog).

The 3-year Action Agenda of NITI Aayog aligns India’s goals with available resources, by predicting the flow of finances during the 14th Finance Commission period thus ensuring that the government’s goals are translated into action by 2020 (NITI Aayog). The Aayog has also organized NITI Lectures: Transforming India, released State Forward- A compendium of Best Practices from Our States and developed an Output-outcome Framework in collaboration with 68 Ministries. The Aayog conducted a National Conference on Good Practices in Social Sector Service Delivery where knowledge was shared by States and Union Territories on, “implementation of good practices with respect to service in the social sector”. These efforts show that the Commission is working in close contact with the States to formulate plans which can be effectively and efficiently implemented and increasing transparency in the Centre’s activities. (NITI Aayog). This commitment towards analysis is further brought out by a separate topic ‘Data Management and Analysis’ in the Annual Report 2016-17 of NITI Aayog.

The funds to the Ministry of Planning in the Budget of the Year 2018 increased by more than 20% over last year i.e to Rs. 339.65 crore in 2018-19 from Rs.279.79 crore in 2017-18. (Press Information Bureau). This budget is utilized towards initiatives like ‘Research Schemes of NITI Aayog 2015′ where “grants-in-aid of Rs. 72.02 lakh has been released – Rs. 66.86 on Research Studies and Rs. 5.16 lakh on Seminars/Workshops/Conferences”. (NITI Aayog)

NITI Aayog was created to serve as the think tank of Government of India and the responsibilities of the Planning Commission of fund allocation have now shifted to the Ministry of Finance.  For the Union Budget 2016, officials said that the NITI Aayog members were being consulted through informal discussions but the Aayog was not formally involved. (Business Standard)

A Comparison

The Institutional framework and the composition of both the Institutions are same at the top with the Prime Minister, the Chair and the Deputies at Cabinet Ministers ranks. But the change in the focus on Members from retired Bureaucrats to experts in the field marks a significant point of difference.

While the Planning Commission focused on preparing and implementing Five Year Plans, NITI Aayog has no mandate to control resources. Its 3-year action agenda is a directive document only. The Planning Commission in its last year i.e. 2014-15 had Rs. 3 lakh crores at its disposal. But The 14th Finance Commission raised the share of states in the divisible pool from 32% to 42%, leaving no additional funds for allocation to states through Niti Aayog. This change called for a complete realignment as the role of NITI Aayog shifted from the allocation function to outcome-based evaluation of programmes. NITI Aayog has to asses, the impact of these changes and it was found that most states except three received higher amounts in transfers in the Financial Year 2015-16 when compared to Financial Year 2014-15. (NITI Aayog)

On the basis of the NITI Aayog’s “recommendations”, Rs. 5,058 crore has been released by Ministry of Finance till January 2017 to States from ‘Special Assistance’ provided under Demand No 32 of Union Expenditure Budget (NITI Aayog). Use of the word ‘recommendations’ signifies the change which has been mentioned above as well. The Ministry of Finance has control over the resources and the NITI Aayog as an objective analysis body provides useful inputs and suggestions.

The Planning Commission and the NITI Aayog both, are not a result of a Legislative but an Administrative Action. But the difference lies in the fact the NITI Aayog encourages federalism and decentralization as an objective sought in the 74th Amendment. On the other hand, as Yashwant Sinha pointed out the Planning Commission was involved in micromanaging the states but should have been involved in perspective planning. (Sinha) Also, The Planning Commission had powers but little accountability. It was the sole arbiter in the allocation of finances to the states and central ministries, smothering the spirit of federalism. (CUTS ). But with the Finance Commission taking over the task, Parliamentarians can directly hold the Finance Minister accountable.


The NITI Aayog has tried to incorporate a lot of criticisms which came erstwhile Planning Commission’s way. It gives directions instead of trying to control the economy in a Liberalized, Globalized and Privatized World. It focuses on analysis and helps give guidelines which are formed through a cooperative structure, instead of controlling the constituent states in a democratic nation. NITI Aayog’s inability to control the resources though does make it toothless but the hope remains that the top class research which the institution has to offer has utmost importance in the Centre’s view. The need of the hour is an autonomous expert body to give advice and ensure fairness in the system by prescribing resource allocation to the deprived after a thorough research.



CUTS . Reinventing the Planning Commission. Jaipur: CUTS International Public Policy Centre, 2014.

Planning Commission. “Annual Plan 2014-15 [Regular Budget].” 2014.

Dab, JayantaKumar. “From Planning Commission to NITI Aayog: End of Nehruvian Legacy Challenges Ahead.” Mainstream Weekly 18 June 2016.

Pangariya, Arvind. NITI Aayog. 2016. 2018 <;.

Pangaria, Arvind. “Times Of India.” 2 January 2017. 2018 <;.

NITI Aayog. “Annual Report 2016-17.” 2016.

Press Information Bureau. NITI Aayog Budget Allocation Increased by More than 20%. 21 February 2018.

Business Standard. Another Budget without NITI Aayog. New Delhi, 12 February 2016.

Sinha, Yashwant. “Fiscal Federalism: An Unequal Balance.” Better Governance for Inclusive Growth. Prod. CUTS International.

Lakshita Singh, the author, is a third-year student from Jindal Global Law School.

Featured image source: Northeast Now

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